Pollution tax won't cut emissions: Abbott

Michelle Grattan

MILLIONS of Australians would be worse off under the government's carbon price scheme and it would not actually cut Australian emissions, the Opposition Leader has warned.

Tony Abbott said the scheme ''certainly sets up the next election to be a referendum on the carbon tax'' - and again challenged the Prime Minister to call an election on it.

''This is a Labor-Green carbon tax and it's going to drive up prices, threaten jobs and do nothing at all for the environment,'' Mr Abbott said. ''You've got to ask yourself, what is the point of all this if millions of Australians are going to be worse off and we are not actually going to cut our emissions?

''This is a redistribution pretending to be compensation. It's a tax increase pretending to be an environmental policy. It's socialism masquerading as environmentalism.''

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He said 10 per cent of households would get no compensation and 60 per cent of households would either be worse off or it would be line-ball. A single-income family on $65,000 a year - that is, below average weekly earnings - with one child under five was worse off, on the government's figuring.

He predicted the government would suffer ''death of a thousand cameos'', as many people looked at the figures and decided they would not be better off.

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As part of the compensation plan, tax rates actually went up, Mr Abbott said. The 15 per cent rate went to 19 per cent; the 30 per cent rate to 33 per cent. ''The government calls this a reform but this is actually the first time since the 1980s that marginal tax rates have been increased.''

Attacking the environmental credentials of the policy, he said Australian's emissions were going to rise from 578 million tonnes to 621 million tonnes by 2020, leaving an abatement gap of just over 100 million tonnes, which would have to be met by purchasing ''carbon credits'' from emissions cuts made overseas.

''Australian businesses are going to have to spend more than $3 billion a year purchasing abatements from abroad - and we all know the potential for fraud, the potential for scamming.''

If up to 50 per cent of the permits could be bought abroad, this would have a dramatic effect on the government's revenue - but it would not bring down household costs. Shadow treasurer Joe Hockey said the scheme would lock a structural deficit into the budget beyond the forward estimates period.

In net terms over the next three years - after the tax cuts - the government was going to collect $17 billion more while its spending would increase by $21 billion. The government had earlier said the scheme would be budget neutral - but on the latest figures it would take $4.3 billion off the bottom line including $2.7 billion this financial year. Mr Abbott predicted the plan would compound the trust problem that had dogged Ms Gillard ''ever since she politically assassinated Kevin Rudd, and has dogged the Prime Minister ever since she was deceptive about the carbon tax before the last election''.

Mr Abbott insisted his commitment to a 5 per cent emissions reduction - the same as the government's 2020 target - could be achieved under his direct action alternative. It would also be achieved ''entirely within Australia - no taxpayers' funds would be spent overseas''.

Opposition environment spokesman Greg Hunt said electricity prices would go up and up - 10 per cent in the first year in the plan.

But the government could not be trusted to estimate the price rise accurately. The tax itself, starting at $23 a tonne would ''go north each and every year''.